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The Technology Select Sector SPDR ETF (NYSEARCA:XLK) was trading as low as $13.08 in March 2009. The index is currently trading at $30.98, or 136.9% above the low made in March 2009.

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In this article, I will feature two tech stocks that have seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

1. Adobe Systems Incorporated (NASDAQ:ADBE) operates as a diversified software company worldwide.

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Insider selling by insider (last 30 days)

  • Matthew Thompson sold 516,393 shares on July 1-2 and currently holds 50,875 shares and 36,752 options or less than 0.1% of the company. Matthew Thompson is Executive Vice President, Worldwide Field Operations Adobe Systems Incorporated.
  • John Warnock sold 50,000 shares on July 2 and currently controls 804,211 shares or 0.2% of the company. John Warnock is Chairman of the Board Adobe Systems Incorporated.
  • Mark Garrett sold 415,276 shares on June 20 - July 2 pursuant to a Rule 10b5-1 trading plan. Mark Garrett currently controls 102,847 shares or less than 0.1% of the company. Mark Garrett is Executive Vice President and Chief Financial Officer Adobe Systems Incorporated.
  • Richard Rowley sold 875 shares on July 1 and currently holds 16,981 shares or less than 0.1% of the company. Richard Rowley is Vice President, Controller.
  • Shantanu Narayen sold 100,000 shares on June 20 - July 1 pursuant to a Rule 10b5-1 trading plan. Shantanu Narayen currently controls 231,672 shares and 788,300 options or 0.2% of the company. Shantanu Narayen is President and Chief Executive Officer, Adobe Systems Incorporated.

Insider selling by calendar month

Here is a table of Adobe's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
July 2013664,1550
June 2013450,2760
May 201300
April 2013324,0730
March 2013465,9620
February 201300
January 2013284,1775,000

There have been 2,188,643 shares sold and there have been 5,000 shares purchased by the insiders this year.

Financials

The company reported the fiscal 2013 second-quarter, which ended May 31, financial results on June 18 with the following highlights:

Revenue$1.0 billion
Net income$76.5 million
Cash$3.9 billion
Debt$1.5 billion

Outlook

  • For the third quarter of fiscal 2013, Adobe is targeting a revenue range of $975 million to $1,025 million, GAAP earnings per share in the range of $0.10 to $0.16 per share and non-GAAP earnings per share in the range of $0.29 to $0.35.
  • For full fiscal year 2013, Adobe is targeting GAAP earnings per share of approximately $0.62 per share and non-GAAP earnings per share of approximately $1.45.

Competition

Adobe's competitors include Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Here is a table comparing these companies.

CompanyADBEAAPLMSFT
Market Cap:23.31B394.98B284.02B
Employees:11,14472,80094,000
Qtrly Rev Growth (yoy):-0.100.110.18
Revenue:4.25B169.10B76.01B
Gross Margin:0.870.400.75
EBITDA:1.13B57.38B30.37B
Operating Margin:0.190.310.36
Net Income:565.35M39.67B16.41B
EPS:1.1341.901.94
P/E:41.2610.0417.55
PEG (5 yr expected):2.830.511.42
P/S:5.482.343.74

Adobe has the highest P/S ratio among these three companies.

My analysis

There have been five different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The stock is trading at a P/E ratio of 41.26 and a forward P/E ratio of 26.97. The company has a book value of $13.76 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.

2. Zillow (NASDAQ:Z) engages in the operation of a real estate and home-related information marketplace on mobile and the Web in the United States.

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Insider selling by insider (last 30 days)

  • Greg Schwartz sold 1,059 shares on June 27 pursuant to a Rule 10b5-1 trading plan. Greg Schwartz currently holds 19,349 options or less than 0.1% of the company. Greg Schwartz is Chief Revenue Officer.
  • Chad Cohen sold 2,429 shares on June 18 pursuant to a Rule 10b5-1 trading plan. Chad Cohen currently holds 475 shares and 41,657 options or 0.1% of the company. Chad Cohen is Chief Financial Officer of the company.
  • Amy Bohutinsky sold 3,500 shares on June 17 pursuant to a Rule 10b5-1 trading plan. Amy Bohutinsky currently holds 16,127 options or less than 0.1% of the company. Amy Bohutinsky is Chief Marketing Officer.
  • Spencer Rascoff sold 7,500 shares on June 14 pursuant to a Rule 10b5-1 trading plan. Spencer Rascoff currently holds 96,771 shares and 17,029 options or 0.3% of the company. Spencer Rascoff is the Chief Executive Officer and a Director of Zillow.
  • David Beitel sold 17,500 shares on June 11-12 pursuant to a Rule 10b5-1 trading plan. David Beitel currently holds 102,284 shares or 0.3% of the company. David Beitel is Chief Technology Officer.

Insider selling by calendar month

Here is a table of Zillow's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 201331,9880
May 2013604,0920
April 201324,4880
March 201337,4880
February 2013403,6680
January 201327,0990

There have been 1,128,823 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 7 with the following highlights:

Revenue$39.0 million
Net loss$3.7 million
Cash and investments$204.1 million

Outlook

  • Zillow's revenue for the second quarter of 2013 is expected to be in the range of $43.5 to $44.5 million. This outlook represents 58% year-over-year growth at the midpoint of the range. For the second quarter outlook on EBITDA, Zillow expects a range of $750,000 to $1.25 million.
  • Revenue for full-year 2013 is expected to be in the range of approximately $178.0 to $182.0 million. This represents a 54% year-over-year growth rate over 2012 full year revenue of $116.9 million at the midpoint of the outlook range. Zillow expects approximately $20 million in full year EBITDA.

Competition

Zillow's competitors include Trulia (NYSE:TRLA) and Move (NASDAQ:MOVE). Here is a table comparing these companies.

CompanyTRLAMOVEZ
Market Cap:1.02B521.51M1.94B
Employees:519943636
Qtrly Rev Growth (yoy):0.970.140.71
Revenue:79.93M205.73M132.98M
Gross Margin:0.860.780.89
EBITDA:-4.21M15.29M8.12M
Operating Margin:-0.090.020.01
Net Income:-8.70M4.69M468.00K
EPS:-0.490.120.01
P/E:N/A109.006,252.22
PEG (5 yr expected):3.1210.90-37.51
P/S:12.792.5314.61

Zillow has the highest P/S ratio among these three companies.

My analysis

There have been five different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 2.10%. The stock is trading at a P/E ratio of 6,252.22 and a forward P/E ratio of 94.10. The company has a book value of $8.49 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are high P/S ratio, high P/E ratio and the intensive insider selling activity.

Source: 2 Tech Stocks With Recent Intensive Insider Selling